Sylvia Jablonski, CIO at Defiance ETFs, breaks down the factors leading to the market's strong start to the week and discusses what investors should be focusing on when it comes to the Russian invasion of Ukraine and inflation.

Closing Bell

Stocks Continue to Trade Higher, Major Indexes End Monday in Green

joining me now is Sylvia Jablonski C. I. O chief investment officer at defiance. CTF symptomatic E. T. F. Provider Sylvia thanks so much for coming on. What was behind this late day rally that we saw on stocks. Hi Kristin, great, great to be on with you guys today. I think, you know, I don't think it's necessarily anything particular today. There's, there's probably some momentum around Tesla stock and the stock split news and thinking about amazon and the stock split news and perhaps, um, you know, rumors that there might be some level of negotiation abroad in terms of the conflict. But what I think we have here is, is just a tradable bottom and you know, we saw the major industries well off of all time highs. The NASDAQ entered into bear territory. It's the first time we've seen 20% more pullback since the financial crisis more or less than the NASDAQ. And although we have these potential headwinds and risks of things like inflation and rate hikes, I think that the investor who has Some cash to deploy and sitting on the sideline is thinking to himself or herself that, you know, locking in cash means losing because of inflation. So equities in a sense, are playing that hedge to inflation here and um, you know, equities 10-20% off of all time highs. I mean they look better than than those feared high multiples we saw um, several months ago. So I think it's, it's just that we're on a tradable bottom. It sounds like you are recommending to clients that they put some money to work here, that they buy the dip even as we've seen stocks rally these past two weeks and certainly to start this week as well. Absolutely. And I think that, you know, some of the stocks that that I was looking at before the pullback, we're in the semiconductor space in the five G space. You know, large cap tech, like apple, google amazon Microsoft, you know, they have 40% plus revenue year over year growth and things like cloud, which are poised to grow. You need 5G for missiles. Personal protection. That's playing out now with with the conflict you need it for electric vehicles, artificial intelligence needed for edge computing. You know, there are a lot of these secular themes that are going to continue to grow and, and I like them, you know, at their at their sort of all time highs last year. So I certainly like them down at these levels. And I think you can choose your spots here. So it's quality, mega cap quality, strong balance sheets and participation in the future of technology. Now, what about the broader concerns Sylvia that still exists in this market? Higher inflation will wait to see what the jobs report tells us at the end of the week, Putin showing no signs of backing down in Ukraine reports that he's trying to split the country into holding onto the southern part now. Um, as it continues to invade Mario pole, that southern ports city? These challenges don't seem to be going away. So how should investors navigate this market knowing that there still are headwinds? Yeah, it's it's it's difficult, you know, on a humanitarian level, what what is happening in Ukraine and Russia is is highly concerning and uh you know, a big issue not to markets but to humanity, right? But in terms of markets, Russia is such a small part of of the U. S. Market, US equity market. You know, the exposure to Russia and some of the major international industries is sub 3% inflation is an issue. It's being exacerbated by what is going on in Russia. I think that um with a lot of the supply chains back online and the reopen trade, some of that will have eased out and it's been replaced with the oil and gas prices. So I just think it kind of drags on longer, but it probably isn't going to be, You know, where it is now, 6-9 months from now. Um and and rate hikes, you know, we have an expanding economy and we have an inflation problem. So yes, that's an issue. But when you look at rate hikes historically, the S. And P. Has rallied for the next 12 months after a rate hike session and you have all these kind of positive backdrops to strong consumer, strong corporations spending, you know, good jobs numbers. So I don't think it's gonna be a stellar growth here. but I also don't think that it's going to be, you know, sort of the worst scenario of all time and therefore I would dip back into the market now. The yield curve inverting traditionally historically, that's been a signal that a recession is on the horizon sometime in the near term. But we've heard some strategists try to calm those worries. What's behind the inverted yield curve? Do you think that a recession could be possible in the near term? I don't suspect that a recession is possible in the near term. Um I think that, you know, a lot of the factors pricing in our current levels of inflation, current, you know, projected Fed hikes and um you know, I think that a lot of what is going on in bond market equity markets are, are sort of due to those two factors, but in terms of recession, again, you have higher wages, you have consumers with strong bounds sheets, 2.7 trillion in savings. You know, economic growth projected to grow at 2.8%. It doesn't seem as the recession would be a near term concern meaning within the next year or so. Um you know, sort of after that and how the Feds sort of responds and reacts to it, you know, it depends um it'll depend on, you know, that implementation. What about meme stocks? I mean, we've seen names like AMC absolutely soar through the roof Gamestop, of course these past few weeks is seen some renewed attention as well with Ryan Cohen Bine shares, There are these meme stocks, Eddie stacks, Sylvia that you're dipping your toe into at least on a short term basis to try to turn a profit. You know what I, what I love about the moon stocks is that it tells me that the kind of youthful retail trader is probably back in the market, which is pretty exciting because we saw a lot of that drop off in in the last six months or so. Um look, I think if you have extra extra cash on the sideline and, and you know, you're looking to kind of take a bet on some of those things, that's perfectly fine, they're not where I'm, you know, putting my money for long term investments, but there are some positive catalysts, I think for AMC and Gamestop and I think that that comes in the form of N F T s. You know, they're looking to build an N F. T marketplace. They're looking to launch commemorative M F T S. Um, and I think, you know, N F T s are one of the growing fastest growing social currencies in, in the marketplace now and, and there's, you know, sort of a huge adoption of this. So If those two companies play a major role there, then, you know, they could very well generate revenues and, and have, you know, justified share growth, but this stellar moves, the 22, you know, sort of 40%, um, in a couple of day moves of, of those stocks are not likely sustainable. They certainly haven't been historically. How do you play the bank stocks Sylvia? I think that there was a lot of attention. We saw the fund flows, a lot of investments going into the bank stocks heading into this year knowing that the Fed was going to raise rates based on what we heard from Powell mid december. And the Feds said to even raise rates more aggressively than we had originally expected as inflation has persisted. The bank stocks underperforming though recently do they look attractive to you? I think, you know, it's, it's good to have a diversified portfolio and in terms of adding some defensive quality types of names to the portfolio. Bank stocks are a good place to look. You know, they are well capitalized, they sort of passed the stress tests through through covid and you know, tells us we're in better shape than we were during the financial crisis for sure. And, you know, banks, particularly regional banks will certainly benefit as rates rise. You know, they sort of capture that margin because they're paying sort of zero on savings. Um, and capturing quite a lot on loans. So the banks are poised to benefit from this, but it'll take a little bit of time for that to play out. And I think in terms of, you know, the short term trader and looking for those faster moving opportunities. Um, some of those are coming out in, in tech now, which is just sort of, you know, badly beaten up and, and looks like it's on its way back. Does Tesla's stock split make it look more attractive with evaluation justified more than a trillion dollars? I think it makes it more attractive because it makes it more affordable to the retail trader. Um, and, and that's, you know, probably going to play out with amazon too. I think that, you know, Tesla is the electric vehicle company of the future. It's there, there's so many retail investors that are interested in Tesla and the technology of, of Tesla. And I think that thinking about the greater themes in the market, like carbon neutrality. Um, you know, climate change and, and even this oil and gas dependence, right? If we all had TVs, we sort of, I wouldn't worry about the price of oil and gas. But um, I think Tesla's just a leader there and it's going to store and, and making the stock price, stock price cheaper and more accessible is, you know, it tends to, tends to work out well for Tesla. Yes, investors, certainly bidding up that stack today. Sylvia, Jablonski chief investment officer at defiance. CTF, Sylvia, thanks so much for taking the time